GBP/AUD – Will Sterling’s woes continue?
The pound has had a terrible time recently, GBP/AUD currently sitting at 1.6408. A small increase in GDP this week did little to bolster Sterling’s position. There are many reasons for Sterling’s weakness and I am struggling to find any reason for the pound to rally. The vote to exit the EU is having a huge impact on the UK economy. UK Inflation has been on a rising increase of late, reaching a high of 2.9%. If the rise continued there was potential the Bank of England would increase interest rates. Several members of the Monetary Policy Committee changed their stance and voted in favour of a rate hike. The rumours of a hike caused a short lived spike for the pound, however more recent inflation data saw a fall to 2.6%. With the chance of a rate hike now dashed, the pound fell in value against the Australian Dollar.
I believe a rate hike is not the solution to increase in inflation and the recent dip is a positive thing bringing us closer to average wage growth at 1.8% . There is a close correlation between average wage growth and inflation. Imported goods are more expensive due to the weak value Sterling the price increase is now being passed on to the consumer. Provided consumers still consider to spend this is fine, if they do not however the UK economy could be in serious trouble. Historically, political uncertainty weakens the currency in question and fifteen members of the conservative party have recently given a vote of no confidence regarding May’s position as PM. We need a stable government in place in order for the pound to rally against the Australian Dollar. Inflation has fallen on the other side of the pond and this is detrimental to the Aussie, but nothing that will weaken it considerably.
Brexit Talks a key factor on GBP/AUD buoyancy levels
Compromises will have to be made and the “have your cake and eat strategy” will have to be dropped. Immigration laws need to allow the freedom of movement of people if there is to be access to free trade and this kind of defeats one of the main reasons .This goes against one of the main reasons that voters chose to leave the EU and would cause public uproar. Which is why I think compromises will be made, do not think these will happen quickly however it is likely to happen over time to soften the blow to those who voted to leave.
If you have a currency trade to perform I will be happpy to help. It is vital to be in touch with an experienced broker when the market is currently so hard to predict. If you let me know the details of your trade I will endeavour to produce a free trading strategy to suit your individual needs. Have confidence knowing you will be dealing with a brokerage in business for over 16yrs, Foreign Currency Direct Plc. We are a no risk entity as we do not speculate on the market and we are registered with the FCA. If you have a currency provider take a minute to send over the rates they offer and I am confident I can demonstrate a significant saving. I can be contacted at [email protected] . (Daniel Johnson) Thank you for reading.